Franchise Global To Acquire German Pharmaceutical And Medical Cannabis Products Distributor For $18.73M In Cash And Stock

Franchise Global Health Inc. FGH WV has entered into a letter of intent dated effective May 6, 2022, outlining the general terms and conditions pursuant to which it has agreed to acquire a leading German pharmaceutical distributor. Management of Franchise Global expects that the acquisition, if completed, will strengthen the company's end-to-end pharmaceutical, medical cannabis operations and infrastructure in Germany, a key market for the company.

Clifford Starke, CEO, director and executive chairman of Franchise Global, stated: "This acquisition will strengthen our position in Germany. The target company has significant experience with regulatory requirements, pharmaceuticals and medicinal cannabis. We expect it to be a solid addition to Franchise Global's core position in Germany, providing deeper access to further pharmacies, wholesale distribution channels and advancing our business plan as Germany moves closer to full legalization of recreational cannabis."

The target company has become a leading German pharmaceutical distributor, offering a wide range of products for some of the top medical brands in Germany.

The transaction is expected to strengthen Franchise Global's growing presence in Germany. The company has previously acquired a 100% interest in Hilzingen-based Phatebo GmbH, a leading distributor of export pharmaceuticals and medical cannabis products in the European Union. Franchise Global said it believes it has an early-mover advantage in the European market after receiving the first medical cannabis import and distribution license granted in Germany in 2017.

Under the terms of the LOI, the company will acquire 100% of the target company, and all of its subsidiaries and affiliated entities that form its business, as well as all the intellectual property used in the business of the target company, for aggregate consideration of €18 million ($18.73 million), with €15.3 million payable in cash and €2.7 million to be paid in common shares of the company. In addition, Franchise Global will pay an earn-out of up to €9 million, payable in common shares of the company, based on financial performance of the target company in fiscal 2024.

The common shares will be issued at a value equal to the 10-day volume-weighted average trading price prior to issuance. It is expected that the cash portion of the purchase price will be funded by Franchise Global through proceeds of financing initiatives.

The LOI serves as an agreement-in-principle concerning the acquisition, and the final structure of the acquisition and its terms and conditions will be subject to receipt by all parties of tax, corporate and securities law advice and will be agreed to and the LOI will be superseded by a definitive agreement, which will contain additional customary representations, warranties, covenants, opinions, conditions and indemnities. The acquisition will be subject to customary closing conditions including the approval of the TSX Venture Exchange, all other required regulatory, shareholder and corporate approvals, compliance with covenants, no material adverse effect, absence of litigation, receipt of audited financial statements of the target company and completion of diligence.

The acquisition is expected to be a "Fundamental Acquisition" as defined in the policies of the TSX Venture Exchange. It is expected that the company's stock will remain halted until the TSX Venture Exchange completes its review of the proposed acquisition. Subject to the entering into of the definitive agreement relating to the acquisition, and the satisfaction or waiver of all conditions precedent to closing, it is expected that the acquisition will close in the fourth quarter of 2022.

Photo: Courtesy of CRYSTALWEED cannabis on Unsplash